A property investment firm which raised tens of millions of pounds from the public through the same marketing company as used by collapsed bond firm London Capital & Finance is hugely delayed on many of its construction sites. Several that should have been finished by now have not even started.
Blackmore Bonds has had to delay paying its 2500 investors last month’s interest instalment and was also late paying out in the previous quarter.
Analysis of its portfolio gives rise to further alarm amid heightened worries among investors and regulators about such high-risk bond firms. Many Blackmore bondholders lost money on LCF.
Blackmore insists there is nothing amiss in its business, but like LCF, it paid 20% or more of bondholders’ money in fees to its marketing company, Surge. That means it has to make a return of 20% before it is even breaking even on bondholders’ money.
Evening Standard research into Blackmore’s 12 sites found only one, near Stratford’s Olympic park, has been fully sold or let. That was bought from a previous developer. The dozen projects are thought to be its entire portfolio.
Blackmore, led by Phillip Nunn and Patrick McCreesh, holds each in a separate company known as a special purpose vehicle. In all bar Stratford, the properties seem to have been used as security to borrow from a finance firm. One surveyor said: “This puts bondholders in second place should anything go wrong. It adds to the risk investors are being put into.”
Blackmore countered that this was a conventional way of increasing profits as it allowed it to take on more projects. It said bondholders had been told of the loans, which typically average about 60% of the gross development value.
All sites bar Stratford are still either in planning or in various stages of completion. Nearly all are way behind schedule.
::At two sites in Preston and Stockport, property agents say building work suddenly ceased recently, with viewings of a show home in Preston halted. The Preston agent said: “Things aren’t moving with the build and haven’t been for two to three months.”
::In Colyton, Devon, a project for three flats was supposed to be completed in October 2018 but local agents reported seeing “maybe some scaffolding but not much else”.
::Near Ashtead, Surrey, a plan to build seven houses has seen no sign of any work, according to neighbours.
::In Stevenage, construction of a £17 million project for 64 flats which Blackmore said would be completed by the end of this year, has not begun. One local surveyor said: “That land is currently a car park.”
::Building work in Birmingham on 34 flats Blackmore said would open in late 2019 has not been started. Sales agents said some demolition work had taken place but the building was not now planned to open until the end of 2020.
::Local agents in Liverpool near a planned £7.6 million development of 24 luxury apartments said they had never heard of the project.
:: In Somerset, six homes were supposed to complete by the end of last year but just three are ready. Three have been sold but the rest are only expected to be finished after Christmas.
:: A plan in Devon’s South Hams to build three homes worth £2.4 million has been stopped, with Blackmore now trying to sell the overgrown land through Strutt & Parker for £850,000. Blackmore secured planning permission and should still make a profit if it sells, having bought it for about £600,000 in 2017.
:: A brace of joint ventures with luxury housebuilder Lusso Homes fared better. Houses in Ealing and Oxshott, Surrey, have mostly been sold and completed to deadline but Blackmore only gets a share of the profits.
The Evening Standard submitted its findings for comment to Blackmore. Sources there blamed delays on the slow property market, Brexit and the collapse of one of its lenders, Amicus. The Amicus loans were on the Preston and Stockport projects, where building work recently stopped. Blackmore said they had just been refinanced with peer-to-peer lender Assetz.
The other loans are with Aura Finance, Kseye, Close Brothers and Cyprus-regulated Nextius Finance.
Blackmore said: “The slowdown in the property market has delayed the sale of some sites, but a number are due to complete in November and December. This has caused a knock-on effect to recent interest payments [to bondholders], but these will be paid by November 29. Our business model is on track and investors can be assured that their investments remain stable because they are secured against tangible assets.”
Blackmore sources said shortfalls in profit from the delays would affect its profits but not investor returns.
It also emerged that Blackmore’s real estate head Ricky Poonia is no longer working full time at the company.
Blackmore appears not to have bought any new properties to develop for a long time, but sources at the company said it had five new sites under offer.
It has delayed filing its accounts and its auditor, Grant Thornton, resigned. New auditors have been appointed. Blackmore stopped accepting money from new investors in the wake of the LCF scandal.
The government has been keen to encourage the public to invest their savings in “alternative assets”. But in cases such as Blackmore, there will be questions over whether the risk to pensioners is really such a good idea.